Spending only in reward categories

[longtimelurker]

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@kdm31091 wrote:

Citi has basically said outright that the card is low profit for them and that's why people get low limits and high APRs. 

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Basically said that?  Or inferred from an unrepresenattive sample on MyFico?   The card appears to being advertized quite heavily.  Probably not a good idea for a low profit card.

[northface28]

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@kdm31091 wrote:

I think generally spending primarily in the reward categories is fine. Many people only use a Freedom or Discover for the bonus categories, and it doesn't seem to be any issue. The problem comes in when it gets abused with the churning and gift card stuff. I don't want to incite that debate again, but that's typically where an issue will come in. Regular spending in the categories shouldn't be a problem. If you are worried you can always throw a couple 1% charges on the card. In many cases the reward difference will be nominal anyway between 1% and 1.5 or 2%.

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Alright, excuse my ignorance, but what is this gift card abuse I read about?

[longtimelurker]

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@northface28 wrote:

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@kdm31091 wrote:

I think generally spending primarily in the reward categories is fine. Many people only use a Freedom or Discover for the bonus categories, and it doesn't seem to be any issue. The problem comes in when it gets abused with the churning and gift card stuff. I don't want to incite that debate again, but that's typically where an issue will come in. Regular spending in the categories shouldn't be a problem. If you are worried you can always throw a couple 1% charges on the card. In many cases the reward difference will be nominal anyway between 1% and 1.5 or 2%.

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Alright, excuse my ignorance, but what is this gift card abuse I read about?

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You go into a store, pick up a gift card and say "You call yourself a gift?  I've seen prettier more useful things lying dead at the bottom of ponds."

For a better answer, search the web for Manufactured Spending

[red259]

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@longtimelurker wrote:

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@kdm31091 wrote:

Citi has basically said outright that the card is low profit for them and that's why people get low limits and high APRs. 

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Basically said that?  Or inferred from an unrepresenattive sample on MyFico?   The card appears to being advertized quite heavily.  Probably not a good idea for a low profit card.

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+1 Would love to see the source material where citi says the card is not profitable. If I had to guess Citi is attempting to target people with weaker credit in hopes of getting them to run up their balance (although its a low credit line so can't do too much damage) and then citi would collect on the high interest rates. This is just my guess though on what their plan may be for the product. 

[Anonymous]

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@northface28 wrote:

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@kdm31091 wrote:

I think generally spending primarily in the reward categories is fine. Many people only use a Freedom or Discover for the bonus categories, and it doesn't seem to be any issue. The problem comes in when it gets abused with the churning and gift card stuff. I don't want to incite that debate again, but that's typically where an issue will come in. Regular spending in the categories shouldn't be a problem. If you are worried you can always throw a couple 1% charges on the card. In many cases the reward difference will be nominal anyway between 1% and 1.5 or 2%.

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Alright, excuse my ignorance, but what is this gift card abuse I read about?

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Step 1.  Have card that gives cashback at a grocery store.

Step 2.  Purchase gift cards for various stores to earn that cashback rate on all spending.

Alternatively

Step 1. Have a card that requires spending to reach signup bonus.

Step 2. Don't spend enough to get bonus.

Step 3. Purchase a ton of Visa/MC/Amex debit cards to cover the difference.

[longtimelurker]

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@Anonymous wrote:

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@northface28 wrote:

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@kdm31091 wrote:

I think generally spending primarily in the reward categories is fine. Many people only use a Freedom or Discover for the bonus categories, and it doesn't seem to be any issue. The problem comes in when it gets abused with the churning and gift card stuff. I don't want to incite that debate again, but that's typically where an issue will come in. Regular spending in the categories shouldn't be a problem. If you are worried you can always throw a couple 1% charges on the card. In many cases the reward difference will be nominal anyway between 1% and 1.5 or 2%.

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Alright, excuse my ignorance, but what is this gift card abuse I read about?

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Step 1.  Have card that gives cashback at a grocery store.

Step 2.  Purchase gift cards for various stores to earn that cashback rate on all spending.

Alternatively

Step 1. Have a card that requires spending to reach signup bonus.

Step 2. Don't spend enough to get bonus.

Step 3. Purchase a ton of Visa/MC/Amex debit cards to cover the difference.

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Neither of those are the type that CCCs really care about

[red259]

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@Anonymous wrote:

The only cases where I've heard it be an issue are the churning cases, where you sign up for a card for the signup bonus, cancel the card as soon as you earn it, and then sign up again down the line, and gift card cases, where people abuse the system to purchase gift cards and can actually generate income if done on a large enough scale. Both of those are banstick offenses, but generally only using a card for the 5% categories, no issue with that. 

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Churning really has nothing to do with the topic in this thread, which is spending only in reward categories. I only mention it because for some reason many threads tend to get hijacked by the topic of churning which is not really applicable to the topic on hand. 

[Anonymous]

+1 lets churn this topic away from that, please.

[Anonymous]

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@Anonymous wrote:
+1 lets churn this topic away from that, please.

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[kdm31091]

I disagree that the examples cited are "not something CCC's care about", because sometimes they do. Typically, buying (some) store gift cards is fine, because they aren't cash equivilants. I don't think issuers would say they "don't care" if you buy a ton of Amex/Visa/MC gift cards to meet bonus spend or to earn extra rewards. But it's not really within the scope of this form to discuss the ins and outs of it, so I'm leaving it at that. Bonus churning has nothing to do with the question at hand, so I'm not even going to discuss that, either.

With regard to Citi saying the card is low profit, I determined such a thing from a thread awhile back where a poster mentioned talking to Citi's EO because they'd gotten a low limit on DC. The rep responded with basically what I said -- low profit means people get low limits/bad APRs. It stands to reason the card cannot possibly be a good profit for them. Lots of ads don't mean it will be around forever, I remember seeing commercials for the Forward and it didn't stick around. Also, I had a Double Cash very briefly before cancelling due to the $1K limit and 22% APR. My conversation with the EO was pretty similar too and basically confirmed they do not give out large limits on the card, period. You can infer what you want, but the obvious reasoning seems to be they aren't making out well profit wise with it. There is no official source of Citi saying it, but it makes sense.